US: Heinz H1 profit climbs, reaffirms guidance
By Michelle Russell | 20 November 2012
- Net profit climbs 18.2%
- Operating profit up 10.2%
- Net sales drop 0.5%
Heinz has booked an increase in H1 profit
US food giant Heinz has booked an increase in profit in the first half of the year and reiterated its full-year sales and earnings guidance.
In the six months ended 28 October, net earnings climbed 18.2% to US$547.5m, the company reported today (20 October).
Operating profit amounted to $802m, a 10.2% increase on the prior year, while net sales dropped 0.5% to $5.62bn.
Heinz reported revenues declines in its Europe and North America divisions of 5.3% and 1.3% respectively in the first half.
Heinz said it remains "on track" to deliver its previously announced sales and profit outlook for fiscal 2013 of "at least" 4% organic sales growth, and EPS growth of 5-8% on a continuing operations basis.
Heinz share price was down 1.45% at $57.87 at 17:04 GMT today.
Heinz Reports Double-Digit EPS Growth to $0.90 from Continuing Operations;
Reaffirms Previously Announced Fiscal 2013 Full-Year Sales and Profit Outlook
Fiscal 2013 Second-Quarter Results - Continuing Operations, Excluding Fiscal 2012 Productivity Charges:
Heinz delivered its 30th consecutive quarter of organic sales growth (volume plus price) of 3.3%.
Reported sales grew 0.5% to $2.83 billion, despite a -2.4% foreign currency exchange impact.
Emerging Markets delivered 13.2% organic sales growth (+10.3% reported) and represented 23% of total Company sales.
Top 15 Brands delivered organic sales growth of 4.6% (+1.7% reported).
Global Ketchup posted 5.0% organic sales growth (+3.8% reported).
Net income grew 10.4% to $290 million (+22.3% reported).
Marketing investment increased 13.4% on a constant currency basis (10.0% reported).
Operating income declined 1.0% (+9.4% reported).
EPS grew 11.1% (+23.3% reported).
On a constant currency basis, sales grew 2.9%, operating income increased 0.5% and EPS rose 13.6% (excluding charges for productivity initiatives in Fiscal 2012).
Heinz reaffirms previously announced Fiscal 2013 full-year sales and profit outlook.
Reconciliations of non-GAAP amounts are set forth in the attached financial tables. Results excluding productivity charges in Fiscal 2012 represent the Company's reported results adjusted to exclude charges for targeted workforce reductions, asset write-offs associated with factory closures and other implementation costs taken in Fiscal 2012 to, among other things, increase manufacturing effectiveness and accelerate growth. Organic sales are defined as volume plus price or total sales growth excluding the impact of foreign exchange and acquisitions and divestitures. Operating free cash flow is defined as cash from operations less capital expenditures net of proceeds from disposal of Property, Plant & Equipment. Also, constant currency as used in this press release is defined as the reported amount adjusted for translation (the effect of changes in average foreign exchange rates between the current period and the corresponding prior year) and the impact of current-year foreign currency translation hedges.
PITTSBURGH--(BUSINESS WIRE)--H.J. Heinz Company (NYSE:HNZ) today reported solid second-quarter results, with growth of 11.1% in earnings per share from continuing operations (excluding charges for productivity initiatives in Fiscal 2012). The results were fueled by dynamic growth in Emerging Markets, continued growth in Global Ketchup and the Company's Top 15 Brands, and a favorable tax rate. This enabled Heinz to significantly increase investment in marketing and global capabilities to drive future growth.
"Heinz delivered solid results while making significant investments in our businesses and brands to drive growth"
"Heinz delivered solid results while making significant investments in our businesses and brands to drive growth," said Chairman, President and CEO William R. Johnson. "Notably, Heinz delivered its 30th consecutive quarter of organic sales growth, led by our trio of growth engines: Emerging Markets, Global Ketchup and the Company's Top 15 Brands."
Second-Quarter Results - Continuing Operations
In the second quarter ended October 28, 2012, reported sales increased 0.5% to $2.83 billion, with unfavorable foreign currency impacting sales by 2.4%. Net pricing increased 1.9% and volume grew 1.4%. Divestitures reduced total sales by 0.4%.
Heinz delivered organic sales growth of 3.3%, led by Emerging Markets, which posted organic sales growth of 13.2% for the quarter (10.3% reported). Organic sales growth was again impacted by prior-year decisions to exit T.G.I. Friday's® frozen meals and downsize the Long Fong® frozen business in China. Emerging Markets represented 23% of total Company sales.
The Company's Top 15 Brands achieved organic sales growth of 4.6% (1.7% reported), led by Heinz®, Quero®, ABC®, Classico®, Golden Circle®, Master® and Ore-Ida® brands. Global Ketchup delivered organic sales growth of 5.0% (3.8% on a reported basis), driven by strong performance in the U.S., Brazil and Russia.
Gross profit of $1.01 billion grew 4.7% and gross margin increased 140 basis points to 35.8%. Excluding charges for productivity initiatives in Fiscal 2012, gross profit increased 1.8% and gross margin increased 40 basis points, despite a $22 million unfavorable impact from foreign exchange and higher commodity costs.
Marketing increased 13.4% on a constant currency basis (10.0% increase on a reported basis), reflecting a significant increase in the U.S. and continued support in Emerging Markets.
SG&A expenses (which excludes marketing) of $502 million increased 0.3% to 17.8% of sales, and increased 2.3% excluding charges for productivity initiatives in Fiscal 2012, reflecting strategic investments to drive growth primarily in Emerging Markets and global systems.
Operating income of $392 million grew 9.4%. Excluding charges for productivity initiatives in Fiscal 2012, operating income declined 1.0% due to a 1.5% unfavorable impact from foreign exchange.
Heinz benefited from a previously projected low tax rate for the quarter. The effective tax rate was 9.6% compared to 18.1% a year ago or 19.6% excluding charges for productivity initiatives in Fiscal 2012. The Company expects a full-year tax rate of around 20%.
Net income from continuing operations of $290 million grew 22.3%, or 10.4% excluding charges for productivity initiatives in Fiscal 2012.
Diluted earnings per share from continuing operations of $0.90 grew 23.3%, or 11.1% excluding charges for productivity initiatives in Fiscal 2012. EPS was unfavorably impacted by $0.02 from foreign currency translation and translation hedges.
On a constant currency, continuing operations basis, sales grew 2.9% and excluding charges for productivity initiatives in Fiscal 2012, operating income increased 0.5% and EPS rose 13.6%. Total Company net income, including discontinued operations, was $289 million and EPS grew to $0.90.
Fiscal 2013 Outlook
"Heinz remains on track to deliver our previously announced sales and profit outlook for Fiscal 2013," Mr. Johnson said.
For the full year, Heinz expects:
At least 4.0% organic sales growth;
Constant currency EPS growth of 5-8% on a continuing operations basis and excluding charges for productivity initiatives in Fiscal 2012; and
Strong operating free cash flow of $1 billion plus.
The Heinz Board of Directors on November 14 approved the continuation of the Company's share repurchase program by authorizing the multi-year repurchase of up to 15,000,000 additional shares.
SECOND-QUARTER OPERATING RESULTS BY BUSINESS SEGMENT
North American Consumer Products
Sales of $795 million increased 0.1%, while increasing 0.4% on an organic basis. Volume increased 1.2%, driven by Heinz® Gravy and Ketchup, Classico® pasta sauces and Ore-Ida® frozen potatoes, partially offset by the exit of T.G.I. Friday's® frozen meals. Net pricing declined 0.8%. Sales were unfavorably impacted 0.6% from the exit of the Boston Market® license. Favorable Canadian exchange translation rates increased sales 0.3%. Operating income of $190 million decreased 5.7%, reflecting a significant increase in marketing.
Sales of $808 million declined 4.2%, while increasing 0.1% on an organic basis. Volume increased 0.3% as strong growth in Russia and the U.K. was partially offset by declines in Italy and The Netherlands. Net pricing decreased 0.2%. Divestitures decreased sales by 0.6%. Unfavorable foreign exchange translation rates reduced sales 3.8%. Operating income of $140 million declined 2.8%, reflecting the impact of foreign currency and higher marketing investment.
Sales of $606 million grew 2.3%, while increasing 4.1% on an organic basis. Volume increased 1.9% led by Master® soy sauce and Heinz® Ketchup and sauces in China. These results reflect the planned decreases in Long Fong® frozen products. Pricing increased 2.2%, driven primarily by Indonesia. Unfavorable foreign exchange translation rates reduced sales 1.9%. Operating income of $50 million grew 24.5%, reflecting strong results in both Developed and Emerging Markets.
Both reported and organic sales grew 4.1% to $348 million. Volume was unchanged in the quarter as growth in Heinz® Ketchup was largely offset by a decline in soup. Pricing increased sales 4.1%, largely due to prior-year increases to offset commodity cost increases. Operating income of $44 million rose 26.8%, due to higher sales and the benefit from productivity initiatives.
Rest of World
Sales of $270 million grew 8.6%, while increasing 19.8% on an organic basis. Volume increased 6.5%, led by Quero® in Brazil. Pricing increased 13.3%, led by Brazil and Venezuela. Unfavorable foreign exchange translation rates reduced sales 11.3%. Operating income of $27 million decreased 15.6% from a very strong growth quarter last year, reflecting unfavorable foreign exchange, inflation in Venezuela and capability investments in Brazil.
For the six months ended October 28, 2012, sales of $5.62 billion decreased 0.5%, and increased 4.0% on an organic basis. Operating income of $802 million increased 10.1%, while decreasing 0.6% excluding charges for productivity initiatives in Fiscal 2012. Net income of $569 million from continuing operations grew 22.7%. Excluding charges for productivity initiatives in Fiscal 2012, net income rose 9.9%. The year-to-date tax rate was 13.8% versus 20.7% last year. The lower tax rate reflects foreign tax planning initiatives and has helped fund marketing capability investments in the business. Diluted earnings per share from continuing operations of $1.76 grew 23.1% and increased 10.0% excluding charges for productivity initiatives in Fiscal 2012. EPS this year was reduced by $0.07 from unfavorable foreign currency translation. On a constant currency, continuing operations basis, sales grew 3.5% and excluding charges for productivity initiatives in Fiscal 2012, operating income grew 2.8% and EPS rose 14.4%. Total Company net income including discontinued operations was $547 million and EPS grew to $1.70.
In the first quarter of Fiscal 2013, Heinz completed the previously announced sale of its U.S. Foodservice frozen desserts business. This transaction resulted in a $32.7 million pre-tax ($21.1 million after-tax) loss, which has been recorded in discontinued operations. The frozen desserts business had reported sales of $35 million in the six months ended October 26, 2011.
Conference Call/Webcast on Second-Quarter Fiscal 2013 Results
H.J. Heinz Company will host a conference call and Webcast for Securities Analysts and Media (listen only) to discuss the Company's second-quarter Fiscal 2013 results and its Fiscal 2013 outlook today, November 20, 2012 at 8:00 a.m. Eastern time.
The meeting will be hosted by:
William R. Johnson, Chairman, President and Chief Executive Officer
Art Winkleblack, Executive Vice President and Chief Financial Officer
Margaret Nollen, Senior Vice President, Strategy and Investor Relations
A Webcast of the meeting and the presentation slides will be available to the general public in real-time and archived for playback on the Company Website, www.Heinz.com.
Original source: Heinz
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